sPeCIAL ArABAL - ALUMINIUM-Nachrichten – ALU-WEB.DE

ECONOMICS
Aluminium S.A. increases production, reduces costs
G. Djukanovic, Podgorica
Aluminium S.A., earlier known as Aluminium
of Greece (AoG) and Aluminium
de Grèce (ADG), is the sole vertically
integrated aluminium producer in Europe
with all production facilities concentrated
in one location. It is the largest alumina
producer in Southern and Eastern Europe
and the second largest primary aluminium
producer next to Romanian Alro.
Aluminium S. A., located in St Nicolas at the
north coast of the Gulf of Corinth, started
production in 1966 as a Pechiney plant, then
under the name ADG. Later it was a base
for the development of the aluminium manufacturing
industry in Greece with numerous
facilities all over the country. Today annual
turnover amounts to more than €2bn. Over
40,000 people are directly and indirectly employed
in the sector. In 2003 ADG became
part of Alcan after the Canadian company
took over Pechiney in France. Alcan sold it to
the Greek private company Mytilineos Group
in 2005.
Aluminium S.A. achieved a steady production
in the past two years of 164,000 tpy of
aluminium (124,000 tonnes of alloyed billets
and 40,000 tonnes of slabs) and around
800,000 tpy of metallurgical grade alumina.
According to a company presentation sales
amounted to €506m and Ebitda to €21m in
2012, whereas sales were €521m in 2011 and
Ebitda €32m. In recent years, since it became
a fully owned subsidiary of Mytilineos Group,
Aluminium S.A. has not published separate
financial reports.
In view of market uncertainty and falling
aluminium prices, the management took the
initiative to develop a strategic growth plan.
The so-called ‘Future’ programme, launched
in 2011, refers to the implementation of a
new, ambitious plan for cutting operating
costs, and to a preliminary agreement for the
acquisition of the bauxite operations of S&B,
the largest bauxite mining company in Greece.
The Future programme – scheduled for completion
by the end of this year – focuses on
ten key areas that the company is addressing.
In 2012 the group launched a new ‘Mellon’
programme (‘Mellon’ = ‘Future’ in Greek),
a large-scale cost-saving programme in order
to further internationalise the group’s metallurgy
and mining business activity. The Mellon
programme will remain a key priority for the
group in 2013, as it works as a crucial safety
valve in the challenging business environment
of limited liquidity. According to this
programme cost savings of €110m a year are
planned and some €90m of cost benefits have
already been achieved. The remaining amount
mainly relates to bauxite sourcing and to production
mergers.
In November 2011, Mytilineos Group and
S&B Industrial Minerals S.A. announced the
initial agreement for the gradual acquisition
of S&B’s bauxite operations by Mytilineos’
View of the cogeneration plant at Aluminium S.A.,
with two HRSGs and two gas turbines
subsidiary Aluminium S.A. However, following
completion of thorough due diligence, a
final agreement was not reached. Evaluating
the challenges presented by the domestic and
international environment, the two companies
will continue to pursue ways to improve the
competitiveness of bauxite mining activities,
whereas their commercial collaboration will
continue without impediments.
Aluminium S.A. has full ownership of Delphi-Distomon
bauxite mines, the second largest
in the country, with current annual production
of around 650,000 tonnes. It is located in
the nearby Amfissa region and employs some
100 people. Despite the fact that the area
is rich in bauxite with over 100m tonnes of
proven reserves (of a total of 650m tonnes in
Greece), the company started importing tropical
bauxite in 2000 (about 200,000 tpy) that is
mixed with Greek bauxite in a process called
© Metka
‘sweetening’. The reason for this is to facilitate
the process because Greek bauxite has a
relatively high content of silica which is more
difficult to process.
Commercial contracts with Glencore
The Mytilineos Group signed a USD2bn deal
in July 2008 to provide Swiss-based trader
Glencore International (now Glencore Xstrata
Plc) with all surplus alumina over a ten-year
period. AoG will deliver more than 5m tonnes
of alumina to Glencore during the period.
Production of alumina will amount 770,000
to 800,000 tpy during the FY2012-2014 period
with a selling price of 13.5% of the LME
3-month aluminium price, which refers to the
contract price and market price for remaining
volumes sold in the spot market (according to
National Securities). The alumina refinery operates
at full capacity of 800,000 tpy; around
60% of the production is sold to third parties,
mainly to Glencore for the contract-linked
price of about 14% of the LME 3-month aluminium
price (according to Eurobank Equities
Research).
In January 2013 Aluminium S.A. signed
a new contract with Glencore for the sale of
75,000 tonnes of aluminium in billets and
slabs, for a total of USD200m. The metal will
be exported to the EU and US markets from
January 2013 to June 2014.
Production costs decreasing
Alumina production costs have been exceeding
USD300/t in recent years while Aluminium
S.A. has been ranked in the third quartile.
After implementing significant cost reduction
measures the cash production costs now stand
at around USD250/t (2013 estimate) which
corresponds to the first to second quartile of
the global alumina cost curve.
The smelter costs were ranked in the fourth
quartile of the global cost curve until recently.
The management expects that after full and
successful implementation of ‘Mellon’, production
costs will be around USD2,000/t. This
would place the company in the second quartile
of the cost curve. However, it is more realistic
to expect costs hardly below USD2,200/t
(3 rd quartile), mainly due to relatively high
electricity prices. In 2013 production costs are
expected to be around USD2,300/t, according
to company reports.
16 ALUMINIUM · 9/2013